Millions of households across Great Britain will see a small but immediate increase in their energy costs from today, as the latest quarterly price cap from regulator Ofgem takes effect.
What the new price cap means for your bills
The change, which began on 1 January 2026, means the typical annual bill for a household paying by direct debit rises by £3, from £1,755 to £1,758. It is crucial to understand that the cap does not limit your total yearly payment. Instead, it sets a maximum price for the unit rates of gas and electricity you use, plus the daily standing charges. Your final bill is still determined by your actual consumption.
For customers using a pre-payment meter, the annual cap has risen from £1,707 to £1,711. Those who pay on receipt of their bill will see their cap increase from £1,890 to £1,894 per year.
Should you fix your energy tariff now?
Consumer champion Which? is urging households to consider locking in a fixed-rate deal. The organisation points out that several tariffs currently on the market are priced below the new cap level, offering potential savings.
"As we head into the coldest months of the year, many households will be concerned that the energy price cap will increase slightly in the new year," said Emily Seymour, Energy Editor at Which?. "There are several deals on the market for lower than the price cap so now is a good time to shop around if you’re looking to fix."
She recommended consumers look for contracts that are cheaper than the current cap, last no longer than 12 months, and do not carry significant exit fees.
Future changes and government policy impacts
Ofgem updates its price cap every three months, meaning the next adjustment will come in April 2026. The regulator stated the latest minor rise was driven by increases in government policy and operating costs. These include funding for major projects like the Sizewell C nuclear plant and social schemes such as the Warm Home Discount.
However, a significant shift is on the horizon. In her November Budget, Chancellor Rachel Reeves announced that average household energy bills will be cut by £150 a year from April 2026. This will be achieved by removing various green levies. Specifically, the Energy Company Obligation (ECO) scheme ends in March 2026, and contributions towards the Renewables Obligation (RO) will be reduced.
Most major suppliers have confirmed that customers on fixed tariffs will still benefit from these savings. Analysts at Cornwall Insight predict the April price cap could fall to around £1,620, a substantial drop of £138 from the new January level.
With bills still historically high despite the recent falls, the advice for consumers remains clear: review your tariff, compare the market, and consider whether a fixed deal could provide certainty and savings in the months ahead.
